Hotel Chains step up their battle with Online Travel Agencies

A good article yesterday in the Wall St. Journal about the major chains continuing in their strategy to reduce their relatively expensive OTA bookings (10-30% commissions, which shows the margins the chains have to play with when negotiating prices). What began as a support system for building revenue is now being viewed as a competitor eating into margins.Unfortunately, the article appears to only be available to subscribers - so here are some highlights;

Online travel agencies booked $99 Billion in hotels last year and hotel bookings are the biggest source of growth for the OTAs and as we all know from the Trivago folks, Captain Obvious and others, spend aggressively on marketing (over $8.5 Billion). Last year was the first year that OTA bookings exceeded direct hotel online bookings for United States properties ($31.4 Billion).

"A survey conducted by travel-data firm Adara Inc. showed that 52% of U.S. travelers between the ages of 18 and 34 prefer booking hotels through online search engines as opposed to brand websites, compared with 37% age 35 and older. Younger travelers are also less likely to participate in hotel-rewards programs, the survey found, raising questions about how much brand loyalty matters to price-sensitive customers. Many prefer third-party sites because they show an array of options and allow customers to package airfare or car rentals".

"Brands have been tweaking their loyalty programs to extend immediate benefits to casual travelers, not just frequent business travelers".

and the quote from the article that caught my attention;"Brian King, global sales officer at Marriott International, said the goal is to convert casual customers into loyal guests who “stay the most, and they pay the most.”

Certainly an understandable, worthwhile goal, (not necessarily so publicly stated) as well as a signal to all travelers to be just as vigilant in seeking deals and watch for incremental costs (amenity fees, coffee charges, and other aggressively creative non-rate increases).

I view this as one more sign of the value of the SPG purchase to Marriott and would not be surprised if over time, we started to see the sharing of SPG pricing w/o the sharing of SPG elite benefit culture. We'll see. As always, be alert, the world needs more lerts.

ercvery interesting I think your conclusion is the most likely scenario going forward "if over time, we started to see the sharing of SPG pricing w/o the sharing of SPG elite benefit culture" Since Travel is up overall I'm pretty sure you are absolutely right.

I also think about

"Brands have been tweaking their loyalty programs to extend immediate benefits to casual travelers, not just frequent business travelers".

This makes me wonder what will be removed from the "frequent business travelers" to "pay" for "extend immediate benefits to casual travelers". I wonder if that idea will be an excuse to further gut frequent traveler programs going forward. very thought provoking article

I would not be surprised to see Marriott move as close to the airline model (perks for the $$$ spenders) as they can effectively get. Here's another blurb about loyalty trends in the hotel business (and Cliff notes below, remember those?) for those w/o the time or interest of slogging thru another article;

It’s a fair statement for a large part of the traveling population — particularly those who focus on budget travel. The last three years have brought great dilution to loyalty programs in the travel industry, which has evolved to focus more on revenue than actual time spent on an airplane or in a hotel.

Without sounding like Chicken Little, I am keeping an eye out for the two-tiered approach; using the relative price inelasticity of loyal SPGers and squeezing the Marriott loyalists, no differently than the cable networks are doing to tv viewing cavemen like myself.

That's why these forums become so valuable as travel tools, yet as they become more valuable to the participant, the sponsor makes it less functional and more company communique. Tough times ahead for the traveler as The Man flexes his leverage.

Exactly - but guess what, Marriott (understandably) will not give an iota more than they feel necessary. Currently with their buying leverage, they are hammering the OTAs (no doubt they are already at the low end of commission charge - they were lower than SPG and now combined will most likely be even lower) and feel they are offering a deal to us travelers by booking on their site; These are the benefits, as they list them on marriott.com, they quote for booking direct:

Marriott most likely will attempt to capture the low hanging fruit first in improving operating margins (G & A savings, obvious cost overruns, negotiating leverage in contracts and financing etc) and it could be quite awhile before they attempt to purchase market share with benefits, and then, probably as discussed above with rls, only to the big $$$ spenders.

Yes, we need to root for airbnb to help keep the chains honest. And yes, they are a threat as they are now moving not only into experiential activities (tours, food, wines etc) but also going after the business traveler (and are substantially capitalized to do as they please).

The chains are taking them seriously, having the hotel association take airbnb on over regulation - slowing them down, but not stopping them.

We don't necessarily need to stay at airbnb to have the chains seek our business more, we just need others, and like you write, it's happening.

Why? Well, it isn’t surprising, but Millennials — major drivers of sharing economy adoption who are also 23 percent more likely to travel than their older counterparts — account for a reported 66 percent of Airbnb’s app traffic.

Additionally, company is also expanding its ambitions in the business travel market, reportedly introducing a new category called “Business Travel Ready.” Airbnb listings in this classification will offer features like desk, Wi-Fi, a hairdryer, and more.

Really interesting stuff here - many thanks erc In addition to their other tactics, Marriott here in the U.K. are also taking on the booking sites by selling directly through the cash back sites. So at the moment MR members get a 4% cash back buying via quidco.com , non-members get 6%. I guess they value our benefits at 2%. Interestingly, Starwood don't participate. Of course, Marriott are much less generous than IHG who are currently giving 8%. I presume you have the equivalent cash back sites in the US?

Cash/points back attempts will never invalidate special rates or bonus promotions, but some special rates and bonus promos may prevent cash/points back from posting. For example, some reservation codes and brands, and all non-commissionable and negotiated corporate rates are excluded, though it never hurts to try. AAA and many other popular codes are compatible. Read the T&Cs carefully if it's critical, or just hope for the best.